The “CBO Canon” and the Debate Over Tax Credits on Federally Operated Health Insurance Exchanges

Abbe Gluck

The latest fracas over health reform—the challenge to subsidies for the federal exchanges—offers a long-overdue opportunity to think about how particular features of modern lawmaking might lead to new interpretive presumptions for statutory interpretation. This is the first of series of posts in which I will flesh out that idea. Here, I will focus on the role of the Congressional Budget Office, and how the “budget score" (the budgetary estimate of the effects of legislation) might be a useful tool of modern statutory interpretation, and how it sheds light on the current debate over the federal exchanges.

In a forthcoming article based on an empirical study of congressional drafting (co-authored with Lisa Bressman), we have argued for a new “CBO canon”: An interpretive presumption that ambiguities in legislation should be construed in the way most consistent with the assumptions underlying the congressional budget score on which the initial legislation was based. Both our empirical study and numerous articles in the political science and popular literature substantiate the notion that Congress now drafts in the shadow of the score. In the context of health reform, there was widespread reporting to this effect. As just one of many examples, the New York Times reported in March 2010: “Democrats have spent more than a year working with the nonpartisan budget office… Whenever the budget office judged some element or elements of the bill would cause a problem meeting the cost and deficit-reduction targets, Democrats just adjusted the underlying legislation to make sure it would hit their goal.”

Indeed, I would suggest that the budget score offers better evidence of congressional “intent” than other commonly consulted non-textual tools, including legislative history. This is because, unlike some types of legislative history, the budget score is produced by a nonpartisan office, widely publicized, often debated and usually the focus of many members and staffers. This gives it indicia of reliability that critics of legislative history have often thought lacking for that tool, and yet to my knowledge the Court has never used the score to help resolve statutory ambiguities.

This brings us to the most recent ACA-related scuffle. The ACA’s opponents have raised a challenge to the IRS's interpretation that the Act allows subsidies not only for those who buy insurance on state-operated exchanges, but also for those who live in states with federally-operated exchanges. The dispute stems from what was most certainly sloppy drafting in the statute—in particular, the separation into two different sections of those provisions concerning the state exchanges and those provisions allowing the federal government to operate an exchange if states are unwilling or unable to do so. (This issue of how courts should construe such hastily-enacted and lengthy statutes is another one that we take up in our forthcoming article and to which I will return in a future post).

In my view, the overall structure of the Act and its legislative history, plus the confirmatory language in the health reform reconciliation bill, amply support the IRS’s position. If more is wanting, however, the CBO evidence makes it a slam dunk. Throughout the debates and reporting over health reform, legislators, the Administration and the media repeatedly discussed and debated the ACA’s CBO score, and at all times that score was based on the provision of subsidies to all qualifying purchasers on the exchanges, regardless of whether those exchanges were operated by the states or the federal government. The “CBO canon” clearly supports the agency’s interpretation.